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Savings Account vs Money Market Account

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Male hand putting coin into a piggy bank

Many of our readers have asked us to explain the difference between a money market account and a savings account. Here are some of the most common questions:

  • Are money market interest rates higher than savings account interest rates?
  • Do money market accounts have a higher minimum deposit requirement?
  • Am I able to write checks, use an ATM card and have greater access to a money market account, compared to a savings account?
  • Are both money market and savings accounts FDIC insured?
  • How do banks use my money in each type of account?

We will answer all of these below. But if you just want the simple answer, here it is: there is virtually no difference between the two account types (with the exception of a money market fund, see below). Use a money market deposit account or a savings account for your emergency savings. They are both FDIC insured, up to $250,000 per institution, per individual. You should choose the account with the highest interest rate, and can shop for the best deal here.

Important Note: There is a difference between a money market deposit account, which is insured by the FDIC and offered by banks, and money market funds, which are offered by brokerages and are not FDIC insured. We don’t know why anyone would chose a money market fund.

Interest Rates

Historically, money market accounts offered much higher interest rates than traditional savings accounts. However, after the 2008 financial crisis, the difference between savings accounts and money market accounts has narrowed. In many cases, you can now earn a higher interest rate with a traditional savings account. And we have yet to find a money market deposit account that beats the best interest rate paid by the leading internet-only banks.

We will show the difference between the savings accounts and money market accounts at a large bank (Bank of America), a large brokerage (Fidelity) and a leading internet-only bank (Ally).

The rates below are as of the publishing date, and you can find the rates updated daily here.

  • Bank of America pays 0.01% on a savings account and 0.03% on a money market deposit account
  • Fidelity pays 0.01% on money swept to an FDIC savings account and 0.01% on money market funds

As you can see, the difference between the savings account rates and money market rates are not as dramatic as they used to be. Even money market funds, offered by brokerages, do not offer higher returns even though they are not FDIC insured. There is no reason to sign up for a money market fund.

Minimum Deposit Requirement

Money market accounts used to pay higher interest rates (no longer), and in return they required higher minimum balance requirements. However, the best accounts no longer have any minimum requirements.

Ally Bank does not require a minimum amount to open a money market account. They do not have a monthly fee, and they do not have a minimum monthly balance. This is the same in both the money market account and the savings account.

Bank of America is stingier. For both the savings account and the money market they require $25 to open the account. And, on the money market you will be charged $12 per month if you fail to have at least $2,500 in your account. The savings account can be completely free (with no minimum balance) if you link it to a savings account. However, given that they only pay between 0.01% and 0.03% interest, we don’t know why anyone would open their accounts.

At Fidelity, any cash not invested is automatically swept into their deposit relationships with banks. They will place the money in banks, making sure that they keep the total balance below the $250,000 investment threshold. This money is effectively kept in savings accounts of large banks (the first on the list is Wells Fargo).

A money market fund typically requires a minimum amount to open. For example, the Government Money Market Fund, which pays 0.01% (like all of the money market funds) requires a shocking $25,000 to open the account. Remember: these accounts are not FDIC insured and have some of the lowest interest rates out there. We think this is a bad option.

If you are looking to invest, brokerages like Fidelity can be great options. However, you should never keep your cash allocation sitting in a brokerage account. The best options available are with internet-only banks like Ally.

Check Writing and ATM Card Usage

Both savings accounts and money market deposit accounts have restrictions on how often you can take out money. You are limited to 6 transactions per month of the following types of transactions:

  • Point of sale transactions (using a debit card)
  • Online and mobile banking transfers
  • Overdraft transfers

If you exceed 6 transfers, you will likely be charged for each additional transfer. If you exceed too many times, or too frequently, your account could be closed by the bank.

Some banks now give you more access to your money market account than your savings account. Ally Bank, for example, gives you unlimited ATM withdrawals from your money market account. That is why they give you a lower interest rate than a savings account, because you have a greater ability to take money out of the account.

FDIC Insurance

Before the Great Recession of 2008, money market accounts were not insured. But most people thought they were insured.

When the whole world started panicking, the money market industry came under threat. So, to make sure the entire banking system did not collapse, the FDIC started insuring money market deposit accounts in addition to money market savings accounts.

But remember: money market funds are like mutual funds, and are not insured.

The insurance covers you up to $250,000 per individual, per bank.

How do Banks Use the Money?

With a savings account, you are giving money to the bank to lend. They have to keep some of your money as a reserve (typically 10% of a deposit from a consumer), and the rest can be used for loans. So, your deposit could be used for credit card lending, loans to corporates, mortgage warehouse credit facilities and more.

With a money market fund, the bank is typically buying short-term (often overnight) commercial paper in the “money market” (hence the name). For example, a big company like General Electric often borrows overnight money. This could be used for a wide variety of general operating purposes. Banks will lend this money overnight. The credit risk is incredibly low, because the chance of General Electric going bankrupt tomorrow is very low. But the bank is paid something. They keep a portion of the return, and give the rest to you in the form of an interest rate.

In money market funds, investment can be varied. The fund could invest in government securities or overnight lending to businesses. The common theme in both money market deposit accounts and money market funds is that these are typically very short term loans. If you lend money for a short period of time, you get a lower interest rate, but you also take less risk.

In Conclusion

You will never get rich putting your money into money market deposit accounts, money market funds, or savings accounts. To invest in your future, you should be investing in index funds like Vanguard.

However, we all have cash requirements. Our emergency fund is one example. The cash allocation of a retirement fund is another example. In order to find the best interest rate, you should look for the highest FDIC insured rate or either a savings account or a money market deposit account.

Right now, the best deals are found with internet-only savings accounts – and not money market accounts. You can find the best deals, updated daily, here.

promo-savings-wide

Nick Clements
Nick Clements |

Nick Clements is a writer at MagnifyMoney. You can email Nick at nick@magnifymoney.com

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Review of Live Oak Bank’s Deposit Rates

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Review of Live Oak Bank
iStock

Chances are you haven’t heard of Live Oak Bank. After all, this lender, based mostly on the web, has only been around since 2008, and it mostly focuses on giving out small business loans to businesses in specific industries, such as veterinary practices or craft breweries.

That’s no reason to pass it up for your personal banking needs, however. In fact, this little gem of a bank has one of the best-kept secrets in the personal banking world: it has one of the highest savings account interest rates you’ll find from an online bank. (More on that below.) And, most of its other personal deposit accounts offer relatively high rates as well.

Let’s take a more in-depth look at its deposit accounts to see if they’re right for you.

How Live Oak Bank rates compare

Live Oak Bank is right on par with the current highest CD rates.

This bank’s minimum deposit requirements also seem to be right on par with other bank’s minimum deposit requirements. The current best CDs out there have minimum deposit requirements both above and below Live Oak Bank’s $2,500 benchmark.

Term

APY

Minimum Deposit

6-month CD

1.25%

$2,500

1-year CD

1.70%

$2,500

18-month CD

1.75%

$2,500

2-year CD

1.85%

$2,500

3-year CD

2.00%

$2,500

4-year CD

2.05%

$2,500

5-year CD

2.30%

$2,500

Rates current as of Dec. 5, 2017.

What else do I need to know about Live Oak Bank’s CDs?

Only U.S. citizens and permanent residents are eligible to open these accounts. It’s a relatively straightforward process to open a CD: Simply complete the forms online, provide any needed documentation (such as your current bank account details), and wait for an account approval. Once your account is open, you can transfer over your deposit, where it will be held for five days before officially launching your CD.

If you need to take out your deposit early, bad news: As with many CDs, you’ll face an early-withdrawal penalty at Live Oak Bank. If your original CD term was for six months, one year or 18 months, you’ll be charged 90 days’ worth of interest. If your original CD term was for longer than that, you’ll be charged a higher rate of 180 days’ worth of interest.

If you are able to resist the urge to withdraw your money early, congratulations! Your CD will automatically renew into a second CD with the same term length. However, don’t panic if that’s not what you want: You have up to 10 days after the CD has matured to withdraw your money penalty-free and park it in your own bank account (whether it’s with Live Oak Bank or not).

APY

Minimum Deposit

1.45%

Up to $5 million

(but only up to $250,000 is FDIC-insured)

Rates current as of Dec. 5, 2017.

How do Live Oak Bank’s savings accounts compare?

When it comes to the best savings accounts with high interest rates, Live Oak Bank is right up there. This means that Live Oak Bank is lowering the bar and allowing anyone to take advantage of these high interest rates, no matter how much is in his or her pocket right now.

What else do I need to know about Live Oak Bank’s savings account?

Live Oak Bank wants you to use your savings account, and use it often, which is one reason why it has no monthly maintenance fee. If there is no activity on your account for 24 months and your balance is less than $10.01, Live Oak Bank will take the remainder of your balance as a Dormant Account Fee and close your account.

Getting money into a Live Oak Bank savings account from an external bank account can take a little bit of time depending on how you do it. If you request the money through Live Oak Bank’s online portal, the funds won’t be available for up to five or six business days. But if you opt instead to send the money to Live Oak Bank from your current bank, the money will be available as soon as it’s received. Your Live Oak Bank savings account will start earning interest as soon as the money posts to your account.

You can easily withdraw your money at any time via ACH transfer. Simply log into your Live Oak Bank savings account and electronically transfer it to whichever bank account you wish. It’ll be available in two to three business days.

You are limited to making just six transactions (deposits or withdrawals) per month with this savings account. That’s not a Live Oak Bank thing; that’s a federal regulation imposed upon savings accounts in the U.S. If you absolutely can’t wait until next month to make another deposit or withdrawal past your allotted six per month, you’ll be charged a $10 transaction fee for each additional action.

Overall review of Live Oak Bank

It’s easy to overlook Live Oak Bank for other larger, more established consumer banks like Ally or Discover Bank. But Live Oak has some of the best CD rates around, and the best savings account available on the market today.

Lest you be scared away by its smaller name, consider this: This tiny-but-growing bank is getting rave reviews from customers and employees alike. It carries an “A” health rating, and has a top-notch online banking portal. About the only thing missing is a checking account to let you seamlessly do all of your daily banking with this great company.

Lindsay VanSomeren
Lindsay VanSomeren |

Lindsay VanSomeren is a writer at MagnifyMoney. You can email Lindsay here

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Review of Chase Bank’s CD Rates

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Review of Chase CD rates
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Chase Bank is a consumer and commercial bank operated by JPMorgan Chase & Co., an international business firm dating back to 1799 that currently has $2.6 trillion in assets and operations worldwide. The bank, insured by the Federal Deposit Insurance Corporation (FDIC), has 5,100 branches and 16,000 ATMs across the United States. Its products include credit cards; checking, savings and CD accounts; and auto and home equity loans.

But Chase’s CDs are the subject of this article; they can be opened at a branch or completely online at term lengths ranging from one to 120 months.

How Chase CD rates compare with those of other banks

We compared Chase’s CD offerings with entries on our current list of the Best CD Rates for December 2017. On the positive side, you’ll need less money to qualify for a Chase CD than you might at other banks. Chase allows customers to open their CDs with a minimum deposit of $1,000, which is slightly lower than qualifying amounts at some other institutions. Chase CDs are also open to applicants who do not bank with Chase, in contrast with the practices of some banks and credit unions that require member checking or savings accounts.

However, Chase CD rates are far from the most competitive rates out there. You can easily get find better APY rates at other institutions, particularly for one-year CDs. If you decide to go with Chase, look into so-called “relationship rates” with a higher APY. Relationship rates are offered to customers who link their CDs to a Chase personal checking account.

On a 12-month CD for under $10,000, for example, you’ll currently draw twice the percentage rate offered on the standard CD.

As mentioned, a minimum of $1,000 is required to open a Chase CD account, and interest is compounded daily. Depending on the term, your earned interest may be paid monthly, quarterly, semi-annually, annually — and at maturity.

Here’s an overview of the rates Chase currently offers on its CD products. All rates were reviewed at Depositaccounts.com, another LendingTree-owned company, and are current as of Dec. 5, 2017.

CD term

APY

Min. deposit amount

1-Month

0.01%

$1,000

2-Month

0.01%

$1,000

3-Month

0.01%

$1,000

6-Month

0.01%

$1,000

9-Month

0.01%

$1,000

12-Month

0.01%

$1,000

15-Month

0.01%

$1,000

18-Month

0.05%

$1,000

21-Month

0.05%

$1,000

24-Month

0.05%

$1,000

30-Month

0.05%

$1,000

36-Month

0.05%

$1,000

42-Month

0.10%

$1,000

48-Month

0.10%

$1,000

60-Month

0.25%

$1,000

84-Month

0.25%

$1,000

120-Month

0.70%

$1,000

Source: DepositAccounts.com, Dec. 5, 2017

Chase CD relationship rates

Chase CD relationship APY rates are extended to customers who have a linked Chase checking account. You can apply online and if you use a transfer from your account to open the CD, the account can be opened the same day. The minimum deposit is, again, $1,000.

CD term

$0 - $9,999

$10K - $24,999.99

$25K - $49,999.99

$50K - $99,999.99

$100K - $249,999.99

$250K+

1-Month

0.02%

0.02%

0.02%

0.02%

0.02%

0.02%

2-Month

0.02%

0.02%

0.02%

0.02%

0.02%

0.02%

3-Month

0.02%

0.02%

0.02%

0.02%

0.02%

0.02%

6-Month

0.02%

0.02%

0.02%

0.02%

0.02%

0.02%

9-Month

0.02%

0.02%

0.02%

0.02%

0.02%

0.02%

12-Month

0.02%

0.02%

0.02%

0.02%

0.05%

0.05%

15-Month

0.05%

0.15%

0.15%

0.15%

0.20%

0.20%

18-Month

0.15%

0.25%

0.25%

0.25%

0.30%

0.30%

21-Month

0.15%

0.25%

0.25%

0.25%

0.30%

0.30%

24-Month

0.15%

0.25%

0.25%

0.25%

0.30%

0.30%

30-Month

0.15%

0.25%

0.25%

0.25%

0.30%

0.30%

36-Month

0.40%

0.60%

0.60%

0.60%

0.65%

0.65%

42-Month

0.40%

0.60%

0.60%

0.60%

0.65%

0.65%

48-Month

0.50%

0.70%

0.70%

0.70%

0.75%

0.75%

60-Month

0.60%

0.80%

0.80%

0.80%

0.85%

0.85%

84-Month

0.60%

0.80%

0.80%

0.80%

0.85%

0.85%

120-Month

1.15%

1.25%

1.25%

1.25%

1.29%

1.29%

Source: DepositAccounts.com, Dec. 5, 2017

Here’s a sample comparison between the APY on standard and relationship CDs on new accounts. To calculate on earnings at maturity, we assumed an account balance of $5,000.

Chase standard CD APY

Earnings at maturity

Chase relationship CD

Earnings at maturity

12 months at 0.01%

$.50

12 months at 0.02%

$1.00

24 months at 0.05%

$5.00

24 months at 0.15%

$15.01

48 months at 0.10%

$20.03

48 months at 0.50%

$100.75

120 months at 0.70%

$361.23

120 months at 1.15%

$605.69

Important information about Chase CDs

Fees

There are no monthly service fees, however there are $15 fees for inbound domestic and international wire transfers (waived if from another Chase account) and outbound domestic wire transfer fees. Accounts can be opened online. Deposits of more than $100,000 must be opened at a Chase branch office.

Non-Chase customer access

You do not need to have a Chase checking or savings account to open a standard Chase CD account. You’ll need to provide a Social Security number, driver’s license and contact information. Deposits must be made from a checking or savings account through your existing bank.

Maturity date and grace period
Law requires banks to alert consumers before the maturation date on CDs. Chase considers the maturity date as the last day of the term. It offers a 10-day grace period on all CDs with terms 14 days or longer. During the grace period, you can withdraw the funds without penalty or roll over the account to another term.

Automatically renewable CDs versus single-maturity CDs

Account holders have the option of opening an automatically renewable or single-maturity CD account.

With an automatically renewable CD, the account renews on the maturity date for the same term as the original one, making the new maturity date the last day of the new term. The standard rate will apply unless the owner qualifies for a relationship CD.

The single-maturity CD does not automatically renew and earns no interest following the maturity date. You may want to see if Chase is offering any promotional rates during the 10-day grace period if you plan to invest in another Chase CD using a ladder strategy.

Earning interest on a Chase CD

Interest on Chase CDs begins to accrue on the first business day of deposit into your account and is calculated on a daily balance, 365 days a year. Paid or credited interest can be withdrawn during the term or at maturity without incurring penalties. For maturities of more than one year, interest will be paid at least annually, according to the bank. If the CD matures and automatically renews, the interest in the account is rolled over into the new principal.

Early-withdrawal penalties and fees
According to Chase, early-withdrawal penalties are deducted from your principal and do not exceed the total amount of earned interest. The penalty is 1 percent of the amount withdrawn if the term of the CD is less than 24 months. The early-withdrawal penalty is 2 percent for terms of 24 months or more.

Chase CD early-withdrawal penalties can be waived upon:

  • Death of a CD owner
  • Disability of a retirement CD owner
  • Retitling of a CD
  • A court ruling that the CD owner is incompetent

The bottom line:

Chase’s CD rates are likely best for customers who link the CD to their personal checking accounts because they can qualify for those juicier relationship rates. The rates improve for longer terms and larger deposit amounts. Chase’s online tools allow you to apply for relationship CDs and track your investments. The minimum amount to open a standard CD account ($1,000) is on par or slightly lower than those required by other institutions. Overall, the APY rates are not as good as you can get from some competing banks and credit unions.

LEARN MORE Secured

on Chase’s secure website

Gabby Hyman
Gabby Hyman |

Gabby Hyman is a writer at MagnifyMoney. You can email Gabby here

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BB&T CD Rates and Review

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Trying to find BB&T CD rates
Source: iStock

As you may know if you’ve done a search for BB&T CD rates, their website is not a helpful place to turn for information. Beyond a basic overview of their CDs on their website stating that they have CDs with terms ranging from seven days to five years, they do not give details on their current rates. BB&T did not respond to email and phone inquiries from MagnifyMoney asking why the bank does not publish its CD rates online.

When we called their customer service number, a representative said BB&T’s CD rates change on a daily basis and said the best way to learn about CD rates is to call or visit a local branch.

So that’s what we did.

We called BB&T branches on Dec. 1 and, on the same day, compared their CD rates to other banks and the national averages. After conducting this research, it’s not surprising BB&T makes their CD rates hard to find — they’re terrible.

BB&T CD rates and products

BB&T offers CD terms ranging from as short as seven days to as long as five years. They have eight CD options, each with different investment goals.

7-day to 60-month

For short-term investments, BB&T offers CDs ranging from seven days to 60 months. These personal CDs offer a fixed rate of return along with the flexibility to focus on developing either a short- or long-term investment.

BB&T CD Term

APY

Minimum Deposit Amount

3 Months

0.03%

$1,000

6 Months

0.05%

$1,000

1 Year

0.10%

$1,000

18 Months

0.15%

$1,000

2 years

0.20%

$1,000

3 Years

0.40%

$1,000

4 Years

0.45%

$1,000

5 Years

0.50%

$1,000

Rates as of Dec. 1, 2017

Not only can you find better CD rates at other banks and credit unions for each of the terms BB&T offers, you can get those better rates with smaller minimum deposits. BB&T’s offerings are far from the best in every term length above — you can see some of the top options in our monthly roundup of the best CD rates.

With the seven-day to 60-month BB&T CDs, there are no penalty-free options for withdrawing your funds prior to the CD reaching maturity. The early withdrawal penalty is the lesser of $25 or 12 months of interest for longer-term CDs. So with smaller initial deposits, early withdrawal penalties will negate any interest you may have earned.

Can’t Lose

As the name of this CD implies, whether rates go up or down, you can’t lose. Well, actually, you can: The APY is so low, you’re almost certainly going to lose money to inflation.

At the 12-month mark of the CD’s term, you may make one withdrawal without paying any fees. So if the market rate is higher than what you’re currently getting, simply withdraw the money and reinvest at the higher rate.

If, however, the interest rate you’re receiving is better than what’s currently available, you also have the option of making a second deposit into the Can’t Lose CD, up to $10,000. This locks in the rate for the new investment amount for the remainder of the term. So whether rates go up or down, you’ll lock in the higher rate.

CD Term

APY

Minimum
Deposit Amount

Withdrawal
Penalties

30-month "Can't Lose"

0.25

$1,000

No penalty for one
withdrawal after 12 months

As of Dec. 1, 2017

Still, you can find many CDs with better APYs than BB&T’s Can’t Lose, whether you’re looking for a 12-month investment or longer.

Stepped Rate

Laddering is a way to stagger your CD investments so you’re able to take advantage of increasing rates. With the Stepped Rate option from BB&T, laddering is built into the CD product. The initial CD starts out at a lower rate and increases each year. For example:

Months

APY

12

0.30%

24

0.40%

36

0.55%

48

0.75%

As of Dec. 1, 2017

This product also allows you to make an additional deposit each year (up to $10,000). So if the interest rate you’re receiving is better than the market, you can invest more money into your existing CD to make a higher return. But if the current CD market is offering better rates than your existing CD, you can simply take advantage of that offer and still make a higher return.

In addition, you may make a withdrawal from what you initially deposited into your Stepped Rate CD after two years. So, again, if the market changes dramatically, you may withdraw your money with no penalty and reinvest in a better option.

Or you could create a CD ladder on your own, choosing CDs with better rates than BB&T’s — higher rates are certainly available.

Add-on

The Add-on CD option from BB&T offers a 12-month CD at 0.10% and an opening deposit of $100. You’ll need a BB&T checking account and a $50/month automatic deposit from your checking account into the CD. To get a personal account, you’ll just need to set up direct deposit or maintain a $1,500 balance.

CD Term

APY

Minimum
Deposit Amount

Withdrawal
Penalties

12-month Add-on

0.10%

$100

Greater of $25 or
6 months’ interest

As of Dec. 1, 2017

Home Saver

If you’re in the market for a new home, and you want to earn a little more interest on the money you’re saving, consider the Home Saver CD. Starting with as little as $100, you’ll be able to deposit money earmarked for your new home every month and earn 0.40% APY. With this CD, as long as you’re withdrawing the money for use toward the purchase of your new home, you won’t pay any penalties for the withdrawal. But you will need a BB&T checking account set up for a monthly deposit of $50 into your Home Saver CD.

CD Term

APY

Minimum
Deposit Amount

Withdrawal
Penalties

36-month Home Saver

0.40%

$100

No penalty for
home purchase

As of Dec. 1, 2017

College Saver

Similar to the Home Saver CD, the College Saver CD is meant for parents or students saving for college. It offers the benefit of starting at a higher APY (0.40%) with the flexibility of withdrawing the money up to four times per year to pay for the cost of attending school. As with the Home Saver, you’ll need to have a BB&T checking account with an automatic monthly deposit of $50. The College Saver offers terms of 36, 48, and 60 months.

CD Term

APY

Minimum
Deposit Amount

Withdrawal
Penalties

36-month College Saver

0.40%

$100

No penalty for
school costs

48-month College Saver

0.45%

$100

No penalty for
school costs

60-month College Saver

0.50%

$100

No penalty for
school costs

As of Dec. 1, 2017

Treasury

This CD offers the ability to make additional deposits of at least $100 into your CD at any time and one monthly withdrawal without penalty. The CD has a six-month term with a variable interest rate tied to the U.S. Treasury Bill — if the rate goes up, you’ll make more money, but if the rate declines, you’ll make less. Right now, rates start at 0.05% and adjust quarterly. Throughout 2016, Treasury Bill rates increased almost every month and have continued to rise in 2017, reaching 1.035% in August. So this is a great option if you have the $5,000 minimum deposit amount and want a short-term investment with the option to add or remove funds from the CD.

CDARS

CDARS stands for Certificate of Deposit Account Registry Service and protects your principal and interest by making sure your money is placed into multiple CDs across a network of banks to keep your CDs insured by the FDIC (maximum limit for each CD is $250,000).

Other things to know about BB&T CDs

Does BB&T allow customers to take advantage of rising rates once they’ve opened a CD?

BB&T has two CD options that allow you to take advantage of rising rates: the 30-month Can’t Lose CD and the 48-month Stepped Rate CD. Both allow you to make a withdrawal before the CD comes to maturity in case rates increase (terms apply). They also allow additional deposits in case rates drop and you want to invest more at the existing rate of your CD. However, the current rates on those products are very low, negating the value of their flexibility.

About BB&T

BB&T (Branch Banking and Trust Co.) is a North Carolina-based bank with locations in 16 states and the District of Columbia, including Alabama, Florida, Georgia, Indiana, Kentucky, Maryland, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington and West Virginia.

BB&T offers a mobile app for both iOS and Android. While their website is easy enough to use, finding specific information, particularly about rates, is impossible. Their customer service number isn’t much help in that regard either, with most questions answered with a suggestion to visit a branch location. As a result, if you don’t live in an area with a branch, we don’t recommend using BB&T’s CDs. To find the BB&T branch closest to you, use their branch locator.

Pros and cons of CDs

A certificate of deposit (CD) may offer a higher return than you’ll get with your savings accounts, without the risk of loss that accompanies other investment options with higher return rates. The drawbacks associated with CDs are the inability to access your funds during the term of the investment without suffering a penalty and the risk of interest rates increasing while your money is locked into a CD for a specified term.

The bottom line: Are BB&T CDs right for you?

BB&T does offer some flexible deals to its customers, but in general, better CD rates can be found at both banks and credit unions with comparable terms. You can find them on our list of the best CD rates, which we update every month.

Ralph Miller
Ralph Miller |

Ralph Miller is a writer at MagnifyMoney. You can email Ralph here

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Investing, Life Events, Retirement, Strategies to Save

Think Twice Before You Max Out Your 401(k)

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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Financial planners can’t emphasize the importance of saving for retirement enough: The earlier you start saving and the more you contribute, the better. But should you max out your retirement account? And if so, how do you do it? 

Unfortunately, there’s no solution suitable for all; every individual has a different financial situation.  

But let’s start with the basics: The maximum amount of money you can contribute to your 401(k), the retirement plan offered by your company, is currently $18,000 a year if you are under age 50, and $24,000 if you are 50 or older. If you were starting from scratch, you would have to tuck away $1,500 a month to max it out by year’s end.  

This is a big chunk of money. And although there are multiple benefits to saving for retirement, you may want to think twice before hitting that maximum.  

Remember, this is money that, once contributed, can’t be withdrawn until age 59.5 without incurring penalties (with some exceptions).  

What’s more, putting away a significant portion of their savings to max out their retirement fund doesn’t make much sense for some workers.  

If you are fresh out of college and your first job pays $50,000 annually, you’d need to save 36 percent of your paychecks to max out your 401(k) for the year.   

“Everyone needs to save for retirement, and the more dollars you could put in, the earlier, the better, but you also need to live your life,” says Eric Dostal, a certified financial planner with Sontag Advisory, which is based in New York. “To the extent that you are not able to do the things that you want to accomplish now, having a really really robust 401(k) balance will be great in your 60s, but that would cost now.”  

A few things to consider BEFORE you max out your 401(k)

  1. Do you have an emergency fund for rainy-day cash? If not, divert any extra funds to establish a fund that will cover at least three to six months’ worth of living expenses.  
  2. Do you have high-interest debt, such as credit card debt? High-interest debts, like credit cards, might actually cost you more in the long run than any potential gains you might earn by investing that money in the market.  Still, if you can get a company match, you should try to contribute enough to capture the full match. It never makes sense to leave money on the table.  
  3. Do you have other near-term goals? Are you planning to buy a house or have a child anytime soon? Do you want to travel around the world? Do you plan to pursue an advanced degree? If so, come up with a savings strategy that makes room for your nonretirement goals as well. That way you can save money for those big-ticket expenses and will be less likely to turn to credit cards or other borrowing methods. 

Maximize your 401(k) contributions

If your emergency fund is flush, your bills are paid and you’re saving for big expenses, you are definitely ready to beef up your retirement contributions.   

First, you’ll want to figure out how much to save.   

At the very least, as we said above, you should contribute enough to qualify for any employer match available to you. This is money your employer promises to contribute toward your retirement fund. There are several different ways a company decides how much to contribute to your 401(k), but the takeaway is the same no matter what — if you miss out on the match, you are leaving free money on the proverbial table. 

If you are comfortable enough to start saving more, here is a good rule of thumb: Save 10 percent of each paycheck for retirement, though you don’t have to get up to 10 percent all at once.  

For instance, try adding 1 percent more to your retirement fund every six months. Some retirement plans even offer automatic step-up contributions, where your contributions are automatically increased by 1 or 2 percent each year. 

Larry Heller, a New York-based certified financial planner and president of Heller Wealth Management, suggests that you increase your contribution amount for the next three pay periods and repeat again until you hit your maximum.  

“You will be surprised that many people can adjust with a little extra taken out of their paycheck,” Heller said.   

Once you’re in the groove of saving for retirement, consider using unexpected windfalls to boost your savings. If you get an annual bonus, for example, you can beef up your 401(k) contribution sum if you haven’t yet met your contribution limit.  

A word of caution: If you’re nearing the maximum contribution for the year, rein in your savings. You can be penalized by the IRS for overcontributing. 

If your goal is to save $18,000 for 2017, check how much you’ve contributed for the year to date and then calculate a percentage of your salary and bonus contributions that will get you there through the year’s remaining pay periods.  

Shen Lu
Shen Lu |

Shen Lu is a writer at MagnifyMoney. You can email Shen at shenlu@magnifymoney.com

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Strategies to Save

How My Emergency Fund Saved My Finances

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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In 2012, Heather Vernillo, then 33, learned she had kidney cancer. The Tampa-area nurse had emergency surgery days later. While her health insurance covered 100 percent of her care, the experience left her unable to work for 15 weeks. This translated to more than four months of missed income, plus a $1,100 monthly bill for COBRA, which kept her health coverage intact during her involuntary hiatus.

Vernillo’s emergency fund turned out to be her saving grace through an ordeal that cost her roughly $7,000.

“The situation pretty much wiped out my savings, but it was worth every penny,” she told MagnifyMoney.

Vernillo’s experience underscores the vital importance of keeping a cash reserve on hand. Still, two-thirds of Americans would struggle to cover a $1,000 emergency, according to a 2016 poll conducted by The Associated Press-NORC Center for Public Affairs Research.

Vernillo is no millionaire. As a nurse, her annual income fluctuated between $95,000 and $50,000 before her diagnosis. (She took a pay cut when she moved from New Jersey to Florida in 2012.) Nonetheless, she says her approach to building her rainy day fund was simple: She set up automatic monthly withdrawals from her checking account to her emergency fund, treating it like any other line item on her budget. It took about two years to build up a fund sufficient enough to cover the expenses she incurred during her medical crisis.

Now, she is focused on rebuilding her fund. This wasn’t always financially easy, she admits, but after her health scare, it was a top priority.

“I’ve been able to partially replenish [my savings] and currently have about two months’ worth of expenses tucked away, just in case,” she says.

Choosing your best worst option

When people don’t have cash on hand for emergencies, they’re more likely to turn to alternative borrowing methods that could wind up costing them much more down the road. (Hello, payday loans.) Sometimes, it can feel like a painful choice from an array of bad options.

If you’ve exhausted all your best options for cash — you’ve emptied your bank account and asked friends and family for loans — then it’s time to look at your next best alternative. And at this point, it’s about choosing the option that will cost you less in the long run.

If you’re overwhelmed with medical bills, for example, ask the doctor or hospital to put you on a payment plan. Or consider a personal loan or a low-interest credit card — whichever option carries the lowest APR. Check out our ranking of the 10 best options for cash when you need it fast.

“If you don’t have any other options, then using a credit card or personal loan to pay for an emergency is better than defaulting on a bill, which can negatively impact your credit score,” Natalie Colley, a financial analyst with Francis Financial, tells MagnifyMoney.  “You’ll pay more in the long run with interest, and ultimately you’re setting yourself up for financial instability and getting caught in a debt cycle.”

The key is to use these methods as a last resort and create a plan to pay down the debt as soon as possible.

Thanks to consistent monthly contributions, Marvin Fontanilla, a 35-year-old marketing professional in San Jose, had $8,000 tucked away in his emergency fund. It was enough to cover three months’ worth of expenses, and it came in handy back in August, when the battery on his hybrid car called it quits. A replacement cost $2,200, and an additional $622 for a rental car to use during the repair.

“It didn’t make a huge dent in our savings because my fiancee and I live way below our means,” Fontanilla says. “We’ve actually already replenished it by taking money we normally use to make aggressive student loan payments and redirecting it back into our savings account.”

While we certainly can’t anticipate every financial emergency that lies ahead, he adds that the death of his car battery didn’t come completely out of the blue; he knew when he bought a hybrid that the battery would likely have to be replaced once he hit 200,000 miles, so the expense was already in the back of his mind.

How much should you save?

Just as there’s no way Vernillo could have predicted her cancer, it’s impossible for any of us to really know what financial twists and turns are in our future.

“We can plan until we’re blue in the face for what lies ahead financially, but no matter how great our planning is, emergencies happen,” says Colley.

She tells her clients to live by a basic rule of thumb for savings: Save for at least three to six months’ worth of expenses.

“That’s a large number, and it’s going to take years to get there, but the important thing is to establish the habit of putting money aside every month and having it automatically transferred from your checking account to your savings account,” she says.

How much you contribute each month depends on a number of factors, not the least of which are income and expenses. After accounting for fixed bills and variable expenses like food and entertainment, what’s left should be divvied up between your financial goals. If your emergency fund is at zero, Colley suggests starting small and focusing solely on the first $1,000; a safe cushion in case of a minor setback.

Once you hit that milestone, you can begin redirecting some money toward other financial goals (like paying off  high-interest debt, dialing up your retirement contributions or saving for a down payment on a home) while continuing to build your emergency fund. Everyone’s goals are different, but the main takeaway here is that it isn’t an either/or situation. Rather, it’s all about saving for multiple goals at once.

Where to stash your savings

Where you keep your emergency fund matters. Colley likes the idea of keeping it at a bank that’s separate from a regular checking account. (Out of sight, out of mind.) She recommends going with an online, high-yield account, like Capital One 360, Ally or Synchrony. While a traditional savings account at your local bank will likely only pay 0.01 percent, these online accounts dole out 1.20 percent with no minimum balance requirement.

Another plus is that it typically takes three days to transfer money into your checking account, which reduces the likelihood of impulsive withdrawals. The idea is to build an emergency fund that’s liquid, but not so liquid that you’ll be tempted to dip into it when the mood strikes.

For smaller pop-up expenses that leave you needing cash on the spot — a flat tire or overdraft protection, for example — Colley says it’s not a bad idea to keep a few hundred dollars in a traditional savings account that can be tapped immediately.

“Having a fully funded emergency savings doesn’t happen overnight, and it also shouldn’t be your one and only focus,” Colley says. “If you do that, all your other goals will come to a grinding halt while you build your savings account.”

Marianne Hayes
Marianne Hayes |

Marianne Hayes is a writer at MagnifyMoney. You can email Marianne here

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